Wood pellet trade doubles over 5 years, driven by biomass power

By RISI | December 26, 2016

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As the world works to replace fossil fuels, wood pellets are playing a key role in decarbonizing power grids. European nations, in particular, have invested heavily in pellets for both heating and electricity generation. To supply this increased demand, global trade in pellets has doubled since 2012, with U.S., Canadian and European producers all playing a role. How this supply stream may evolve is the focus of the European Pellet Supply and Cost Analysis, a new study from RISI, an information provider for the global forest products industry.

"Over the past five years, the wood pellet industry has expanded more than any other forest product industry, both in terms of wood consumed and dollars invested," said Seth Walker, RISI bioenergy economist and author of the new study. "Pellet imports by power plants in England, Belgium and Denmark are driving demand and investment for pellet-producing countries like the U.S., Canada and European suppliers like Latvia, Estonia and Portugal."

While much of Europe's appetite for pellets has been met by the U.S. South, the new study sees potential for this to change going forward.

"The strength of the U.S. dollar means that its producers now have a higher cost structure than many competing European countries," Walker said. "Our analysis looks at how exchange rates factor into competitiveness, along with production and shipping costs."

The European Pellet Supply and Cost Analysis is the first fine-grained analysis of the regions supplying this large and growing market. For each major exporter of pellets to Europe, it provides details on pellet output, fiber furnish shares, production costs, facility ownership and market share, information on logistics and trade and more, including:

Cost models for major supply regions to Europe

Supply curves featuring cash costs for pellets delivered to major centers of trade

Sensitivity analysis of how shifts in exchange rates affect the competitiveness of key pellet-supplying regions and countries.